MGP Ingredients (NASDAQ:MGPI) continues to struggle as the low-carbohydrate diet trend declines. Still, many of its products have a good shot at generating steady growth, even as the firm explores new options with solid potential.

MGP disclosed that its second-quarter earnings came in at $1.4 million, down 26% from $1.8 million in the comparable period last fiscal year, while net sales inched up 3%, from $59.4 million to $61.2 million. The sluggish results were not entirely unexpected. As W.D. Crotty noted back in December, MGP slashed its estimates for fiscal 2005 earnings to between $0.40 and $0.50 per share, down from a range of $1.03 to $1.08, while blaming diminished demand for its resistant-starch offerings, which help food makers reduce carbohydrate levels in their products.

MGP's low-carb hangover showed some signs of moderating. The firm did experience a sales decline in its Arise wheat protein isolates, as well as competition in that area from Archer Daniels Midland (NYSE:ADM). MGP's Wheatex textured wheat proteins likewise suffered. But not all the news was bad. MGP enjoyed solid gains in its Polytriticum grain-based resin line used in pet treats. And sales of Fibersym, which had been falling along with low-carb trends, increased from the prior quarter.

Looking ahead, MGP's long-term picture is far from bleak. While Fibersym's use in low-carb items may continue to decline, the additive remains promising for its ability to increase fiber in foods without significantly altering taste. Unlike low-carb offerings, high-fiber foods are likely to remain an important component of healthy diets. The company is currently shopping Fibersym's applications in whole grain products. In addition, MGP is preparing to introduce a new ingredient in its Wheatex line that combines wheat and soy components. Given Dean Foods' (NYSE:DF) success with its Silk soymilk line, MGP's soy additive may be an attractive additive for food manufacturers.

MGP's stock remains pricey, based on the current outlook of fiscal 2005 earnings between $0.40 and $0.50 per share. Still, the company may be worth keeping an eye on.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.